The government has the ability to send funds directly to people obviously...that’s how they are sending the stimulus checks and send tax refunds.
Banks are basically being compensated for doing paperwork.
sincerely,
"the civil liberties lobby"
I am not a banker, so this is all second hand information I have read on r/smallbusiness and other forums while trying to figure out my own stuff.
Don't get me wrong, I think they are getting paid a ton, probably too much, but it is not zero risk.
[0] https://www.reuters.com/article/us-health-coronavirus-stimul...
They're really being compensated for having the network to do what the government wanted to. No one else has the capacity to give money to small (and some large) businesses in a record amount of time.
I'd pay 5% to get the stimulus cash a few days after the bill is passed...and I guess the same for the government /taxpayers. Corona loans that go out in October are no good, so you pay a fee for performance. Call that $10B a Bank Stimulus Act
The banks are doing jack shit in terms of useful work except shoveling application's SBA's way, with the SBA being the ultimate approver of the loan anyway! Bank are just in middle and limiting applications to their existing customers for no good reason whatsoever.
For companies with employees, that is IRS Forms 940 and 941.
For Sole Props that is your IRS Form 1040 and Schedule-C.
The IRS likely has the banking information for your company (or your payroll processor) and if they don't they have your business address, and could cut checks like they do EVERY YEAR.
Claiming that a bank has to be there to process the paperwork is just plain ignorant of the amount of information the IRS already requires from companies on a quarterly and yearly basis.
But even the banks who blatantly processed the applications in an unfair or discriminatory manner probably aren’t losing much sleep. The clients with the resources & connections to make a stink are the clients who got approved. Funny how that works.
I also agree that a lot of banks probably aren't losing much sleep, but that's different than saying this whole thing is risk free to the banks.
In the future, we'll have better systems for this kind of thing but we don't have them today. The bank plan was the most expedient one.
Actually a major issue with the stimulus is that the government does not have this ability, which is why it will takes months for some people to get their checks. Many people don't have to file income taxes, so the government doesn't have their info.
the problems relate to unemployement systems (completely different system) or our administration holding things up (trump demanding his name be on the checks)
$10B seems like a pretty low number for this risk plus the cost of servicing the loans over time.
Anyone who works in the financial industry knows that client onboarding is painful.
Most banks are only working with existing customers, so the DD is 99% complete. Few are reviewing applications from brand new clients.
From Matt Levine:
> Big banks that paid billions of dollars in sanctions after the 2008 financial crisis for flaws or omissions in loan applications -- in that case, mortgages -- assumed paperwork submitted to the SBA would need to meet high standards, or they would risk getting in trouble again. Wells Fargo has been under particular pressure to show that it overhauled its internal controls.
Now that wasn't in the end the case as:
> Some were floored when the SBA posted a notice on its website on Tuesday, confirming that’s necessary but saying that “lenders who did not understand that these steps are required” didn’t need to withdraw applications already submitted. That essentially gave an edge to lenders that had skipped that time-intensive step to get their customers’ applications in first.
But that was (some of the) banks' view.
Seems you're extolling their ability to perform quickly, while also excusing away their inability to perform quickly.